Did you know that everyone, and I mean everyone, takes at least some impulse trades? I have yet to meet a trader who never, ever deviates from their plan (and I have met lots of traders since the summer of 1994).

But you know what, it isn't the first impulse trade that is the problem. Let's say you jump in when you didn't plan to and in a matter of some time (usually short) the trade goes straight to your stop. How much damage have you done?

One trade - one normal stop out - how bad can it be?

Ah... but that isn't the way it goes is it? Once that loss occurs, then a whole cascade of other things begins to occur - doesn't it? There is the trade to get the money back and the trade you miss while you are aggravated at yourself over the first trade and then the trade you take to make up for that one and then the trade....

So... see the problem isn't that one loser - it is the avalanche that comes afterwards. How does this happen?

Mostly it happens because the "model" everyone is working with as far as their own psychology is concerned is just plain wrong - that is right, flat out wrong. No you don't have to (because you can't and aren't supposed to) control your emotions.

Furthermore, every ounce of effort that goes into controlling an emotion is both wasted and in fact only increases the chances of another impulse trade occurring.

Check out Colin Camerer et. al. in the Journal of Economic Literature (2005). He and his co-authors say things like "emotions are absolutely necessary for a cognition (thought) to be effected through action. In other words, you need your feelings to do anything!

Every impulse trade ever taken in the history of trading is an emotion that has gone unrecognized - a feeling of something. So... how does one solve that? ... uh... through their feelings. The thoughts just aren't going to cut it.

Don't shoot the messenger but the neurofinance guys have a term for this idea "Radical neuroeconomics." They say the whole model is wrong - and they are right.

All you have to do is pay attention to your emotions - and in turn control your actions. If you do pay attention to your emotions - try to understand what they are telling you, learn to separate the desire to not be stopped out from the intuition that tells you the market is turning.... it opens up a whole new avenue to consistently successful trading. ... and oh by the way, you have got the scientists at your back!